Funding, Barley, Regulatory Issues Hindering Industry
Even as craft breweries fight back against a
Budweiser Super Bowl ad that mocked them, a number of issues at both the
national and state level are bedeviling the booming microbrewing industry.
One major issue
is the difficulty of acquiring capital. With craft beer sales booming (the
segment now accounts for 14 percent of all beer sales in the US), meeting
demand means building brewing capacity, and that requires more money. While
some craft breweries have gone for a go-slow strategy of incrementally
increasing their capacity, other have turned to private equity funds. However,
PE money comes with some drawbacks, such as a loss of control and a pressure to
generate a profit. Others have sold shares to employees, which can raise some
capital but has a distinctly limited upside.
Other issues
facing the industry are more parochial. One looming threat is a shortage of
barley, a key ingredient in craft brews. Weather severely impacted the most
recent crop, creating a potential short-term shortage. The problem is
compounded by an ongoing decline in the number of barley farms. The net effect
is likely going to be sharp upturns in the price of barely for craft brewers.
Another issue is that with the growth in popularity of barrel-aging craft
brews, a shortage of appropriate barrels has developed.
Beyond these
issues, craft brewers also face an array of state and local regulations that
are often designed to limit their ability to compete with their larger rivals
or to disrupt existing networks of big distributors. For example, Indiana has a
complex array of post-Prohibition era laws designed to limit the independent
distribution of beer.
What This Means For Small Business:
While these issues pertain specifically to the high-profile craft beer
industry, costly regulatory burdens are experienced by many small business
owners. The high-profile nature of the craft brewing industry does, however,
bring these issues to the forefront in a way that their impact on other firms
does not.
Additional Reading:
The New York
Times
covers the funding challenges, while WBAY-TV reports on the barley shortage.
The Austin
(TX) Chronicle
covers the lack of barrels while the Terre
Haute (IN) Tribune Star
looks at the impact of state regulations on a prominent small brewer. A St. Cloud
Times piece picked up by USA Today covers the spat with Budweiser.
This news article is intended to keep small business owners apprised of current events that may affect them. It does not necessarily reflect NFIB’s policy position on such issues.
